IFX Market Report
Tuesday 3rd October 2017

Market Report

Disappointing Manufacturing PMI figures released yesterday morning led to an early GBP fall. The Purchasing Managers’ Index dropped to 55.9 points, below teh 56.3 expected – mainly attributed to factory costs rising at the fastest pace since March.

Furthermore, political unrest throughout the UK government gives little market confidence as Prime Minister Theresa May faces potential leadership challenges. The PM however, is expected to deliver a potential market-moving speech on Wednesday during the Conservative party conference.

With negative UK PMI figures and positive European data, the pound opened at 1.1356 and dropped throughout the morning to a low of 1.1285. A slight recovery was seen late in the afternoon as the pound went on to break back through the 1.13 level.

The pound also fell against the dollar to a fresh 3-week low. Sterling opened at 1.3360 and carried on to lows of 1.3258, falling through 2 levels of support on the way down.

Worldwide News

In Spain, the clashes between police and referendum voters fuelled anxiety across the Eurozone. Spanish Prime Minister Mariano Rajoy now faces a huge uphill challenge, the biggest threat to constitutional harmony in decades. Reports say the illegal referendum attracted over 2 million votes and resulted in a 90% vote in favour of a split from Madrid. However the result is said to be quite misleading as most remain voters stayed at home. Polls have suggested an official referendum would result in a much closer 50/50 result.

Eurozone Manufacturing PMI figures came out at 58.1 which marks the most productive month for European factories since 2011. The Eurozone Unemployment rate was higher than forecast at 9.1% versus 9.0 but remains unchanged from the reading seen for the last two months, the lowest since Feb 2009.

The US also reported increase in PMI data by 0.1 to 53.1. More significantly, the US dollar was boosted by ISM Manufacturing data posted the highest reading since 2004, rising from 58.8 to 60.3 points. The index is now in line with GDP growth, increasing likelihood of third US interest rate hike

The EUR opened 1.1763 against the dollar and continued to trade down to the daily low of 1.1731 around noon. As the afternoon progressed the euro reversed earlier losses reaching 1.1758 before the publication of the ISM results which sent EURUSD back down to 1.1736.

Overnight in Australia the RBA kept interest rates on hold at 1.5% as expected, citing a stronger currency would slow the economy and restrain price pressures. GBPAUD touched 1.7000 just before the announcement, but went on to fall to 1.6975 afterwards.